Abstract
The
auditor’s independence is a veritable tool of the auditing profession, a
crucial element of the statutory corporate reporting process and a key
ingredient of the adding of value to an audited financial statement. Corporate
performance is an important concept that relate to the ways and manner in which
financial resources available to an organizational are judiciously used to
achieved the overall corporate objectives of an organization. It keeps the
organization in business and creates a greater prospect for future opportunity.
The economic dependent resulting from the provision of non auditing services,
the familiarity developed from lengthy auditor tenure and personnel
relationship alumni employees have been alleged to contribute to this erosion
of auditor’s independence. Thus, the main objective of this study is to examine
the auditor’s independence and corporate performance. The study also attempts
to determine the relationship between audit tenure and non audit service, and
how corporate performance is measure. The data used in the study was generated
from questionnaire distribution to auditors, financial manger, and
academicians, In Edo, Delta, Lagos, Ondo, Ogun and Port Harcourt.
TABLE OF
CONTENTS
Title Page
Certification
Dedication
Acknowledgements
Abstract
Table of Contents
CHAPTER ONE: INTRODUCTION
1.1 Background
to the Study
1.2 Statement
of Problem
1.3 Research
Questions
1.4 Objectives
of the Study
1.5 Statement
of Hypothesis
1.6 Significance
of the Study
1.7 Scope
of the Study
1.8 Limitation
of the Study
1.9 Definitions
of Terms
CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction
2.2 Expectations
Gap
2.3 Independence in Fact and Appearance
2.4 Factors
affecting Independence of the auditors
2.5 Non Audit Services (NAS)
2.6 Management
Advisory System (MAS)
2.7 Empirical
Evidence of Reaction to Non-Audit Services
2.8 Impact
of Culture on Performance
2.9 Corporate
Performance
2.10 What
is Performance?
2.11 Conceptual
of Balance Scorecard
CHAPTER THREE: RESEARCH METHOD AND DESIGN
3.1 Introduction
3.2 Research
Design
3.3 Description
of Population to the Study
3.4 Sample
Size
3.5 Sampling Techniques
3.6 Sources
of Data Collection
3.7 Method
of Data Presentation
3.8 Method
of Data Analysis
CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND
INTERPRETATION
4.1 Introduction
4.2 Presentation
of Data
4.3 Data
Analysis
4.4 Hypotheses
Testing
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION
AND RECOMMENDATIONS
5.1 Introduction
5.2 Summary of Findings
5.3 Conclusion
5.4 Recommendations
References
Appendices
CHAPTER
ONE
INTRODUCTION
1.1 Background
to the Study
The auditor’s independence is a
cornerstone of the auditing profession. A crucial clement in the statutory
corporate reporting process and a key prerequisite for the adding of value to
an audited financial statement (Mautz & Sharaf, 2003). In a general sense,
auditor’s independence has borne a relationship to the prevailing commercial
environment in different time periods. Independence is a state of the mind
characterize by objectivity and integrity on the part of the auditors. It
implies the performance of auditors work without being biased and avoiding
undue influence.
Corporate performance is the final
results of all activities. It evaluate performance, the emphasis is on
assessing the current behavior of the organization in respect of its efficiency
and effectiveness. Corporate performance is an important concept that relates
to the way and manner in which financial resources available to an organization
are judiciously used to achieve the overall corporate objective of an
organization; it keep the organization in business and create a greater
prospect for future opportunities.
The provision of non audit services
by audit firms does not necessarily influence the independence of auditors as
other writers have said. However, where the fees generated from such non audit
services are considerably high (in proportion to the audit fees earned by such accounting
firms and insufficient safeguard operates to protect the auditor independence. This create a situation whereby the
auditors independence is likely to be compromised since the auditor may be
denied inscriptive contracts (in the form of fees generated from NAS) where he
decides to give a qualified opinion on the financial statement being audited.
There are number of performance
measurement tools, which could be clubbed into broad groups like (A)
traditional measures (B) non-traditional measures. Traditional measures which
indicate the financial strength, weakness, opportunities and threats and return
on investment (ROL), Residual income (RI), etc but it is found that some users
of financial statement are interested on non-financial performance. In some
case, some non-traditional measurement tools are to be used like economic value
added. Balance scorecard, etc in the long run, if any area is either were emphasized,
performance evaluation by the auditors will become unbalance. In this way, the
aim of the concept is to establish a set of measure both financial and
non-financial through which a company can control its activities and balance
various measures to effectively track performance.
1.2 Statement of Problem
Auditors’
independence is one
of the most important issues in accounting practice today. Independence
increases the effectiveness of the audit by providing assurance that the
auditor will plan and execute the audit objectively. Because of the importance
of auditors’ independence to audit quality performance in an organization, the
security and exchange commission (SEC) has engaged in substantial rule making
in this area without a conceptual framework. In the wake of the recent
corporate performance around the globe, attention has been drawn to the issues
of auditors having market based institutional incentives to act independently
in protecting their reputation and independent (Zmijwski, 2003). The question
of whether auditors’ independence, organizational culture and mechanism on
governance have an impact on corporate performance has been the subject of much
debate and research. Auditors’ independence is an essential feature of an
efficient capital market. Managers have incentives to reduce agency costs in
the firm by hiring independent auditors (Jenson & Meckling, 2006).
Typically, the accusation made, that auditors have allowed inappropriate
accounting treatment which therefore affects their independence by the non
audit fees payable to them. The problems inherent in these study are those
auditors who may become too close to the company they are auditing or because their
objectivity may be challenged due to reliance on income from a single source.
1.3 Research
Questions
In the light of the foregoing the
following research questions are raised.
1. Does
corporate governance positively affects corporate performance?
2. Does
the effectiveness of auditor’s independence on corporate governance have impact
on listed firms in the Nigerian Stock Exchange?
3. What
is the relationship between Audit Firm Tenure and The Provision of non Audit
Service?
4. Does
provision of non audit services have a significant impact on auditors’
independence?
5. Does
the financial statement of the listed firms in the Nigerian Stock Exchange have
any impact on corporate governance?
1.4 Objective
of the Study
The aim of this study is to
empirically examine the auditors’ independence and corporate performance in
Nigeria. The study attempted to achieve the following objectives.
1. To
find out if corporate governance positively affects corporate performance.
2. To
examine the effectiveness on auditor’s independence on corporate governance of
the listed firms in the Nigerian Stock Exchange.
3. To
determine the relationship between Audit. Firm Tenure and the provision of non
audit services.
4. To
find out if the provision of non audit services have significant impact on
auditors’ independence.
5. To
assess the financial statement of the listed firms in the Nigerian Stock
Exchange on corporate governance.
1.5 Statement of Hypotheses
The following hypothesis was stated.
Hypothesis One
HO: There is no positive relationship between
audit firm tenure and the provision of non audit services in Nigeria.
HI: There is a positive relationship
between audit firm tenure and the provision of non audit services in Nigeria.
Hypothesis Two
HO:
There is no significant relationship
between auditor’s independence and corporate governance.
HI: There is a significant relationship between
auditor’s independence and corporate governance.
Hypothesis Three
HO: There is no significance relationship
between the financial statement of the listed firms in the Nigerian Stock
Exchange and corporate governance.
HI: There is a significance relationship
between the financial statement of the listed firms in the Nigerian Stock
Exchange and corporate governance.
1.6 Significance
of the Study
This study is very significant, in
that the result of the investigation would contribute to the current debate on
the appropriateness or otherwise of audit firms providing non audit services to
audit clients. Different users of financial statement would equally be aware of
the inherent risk attributable to auditors providing non audit service. The
study is significant in the following areas;
i. Accountants: Professional accountants in the
country will also benefit from the findings of the study because it will reveal
the state and quality of the accounting and audit services they render to audit
firms in Nigeria.
ii. Government: The study is of significance to the
Nigerian government and institutionalized financial regulators in the country
because it will show where legislations needs to be made or modified to provide
for more effective regulation of the business activities in the country.
iii. Statutory Bodies: It is also to assess relevant
provision by statutory bodies and standard on auditor’s independence and
ascertain how credible it has been.
1.7 Scope
of the Study
The focus of the subject matter in
this research is the auditors’ Independence and corporate performance in the
private sector. The geographical area used in the study includes Banks in Edo
and Delta States.
1.8 Limitations
of the Study
In the course of this research work,
the following were the limitations, the process of respondent in some selected banks
in Edo State, Delta State, Lagos State, Ondo State, Ogun State and some
selected banks in Port Harcourt that were used limited the scope of this work.
This is because it was only the perceptions of auditor’s and practicing
accountant in those state measured above that were used. The selection process
of respondent for the study was not completely random,; it was observed that
some of the study was not completely random; it was observed that some of the
respondents were reluctant in giving the invitation a pas. It is therefore not
possible to ascertain the extent to which this attitude would have influenced
the reliability of the information provided.
·
The
inability to obtain completely random sampling size.
·
Respondents
were too reluctant in giving information provided
1.9 Definition
of Terms
Audit: The
independent examination
of/and expression of an opinion on the financial statement/ performance of an
enterprise by an appointed auditor in pursuance of that appointment and in
compliance with any relevant statutory obligation.
Audit fees: Fees paid to a company’s auditors
which are approved by the shareholders at an AGM.
Auditors Qualification: A form of words in a report from the
auditors of a company’s account. Stating
that in their opinion the accounts are not a true reflection of the
company’s finance position.
Auditors Report: A report written by a company’s
auditors after they have examined the accounts of the company.
Finance Statement: A document that shows the financial
statement of a company.
Integrity: A state of honesty but with a wide
range of qualities such as fairness, candour, courage, intellectual honesty and
confidentiality.
Objectivity: A state of mind which excludes
bias, prejudice and compromise and which gives fair and impartial consideration
to all matter that are relevant to the present task, disregarding those that
are not.
Non-audit services: All services provided by an auditor
that are not considered as an audit.
Balance scorecard:
Balance Scorecard is an organizational framework for implementing and managing
strategy at all levels of an enterprise by linking objectives, initiatives and
measures to an organization’s strategy.
Independence: Function of character with
characteristics of integrity and trustworthiness being essential or the absence
of interest that creates an unacceptable risk of bias.
Corporate performance: Is the outcome of the frame won
effort during a specified period. An accomplishment of an organization. The
past that can realistically be expected rather than what is desired.
Organizational culture: Is a specific collection of values
and norms that are shared by people and groups in an organization and that
control the ways they interact with each other and with stakeholders outside
the organization.
Corporate Governance: Corporate governance involves a
system by which governing institutions and other organization related to their
communities and stakeholders to improve their quality of services rendered to
their host communities and stakeholders. It is paramount that good corporate
governance should ensure transparency, accountability and fairness in reporting
information.
Login To Comment